A monopsonist that faces a labor supply curve of the form l = 4w and has a constant marginal revenue product of 50 per unit of l,will opt for the following,w,l combination:

Question

Quizplus · Accepted Answer

To determine the optimal choice of w and l for the monopsonist, we need to equate the marginal cost of labor (MCL) to the marginal revenue product of labor (MRPL):

MCL = w(1-1/EL) = w(1-1/(dl/dw)) = w(1-1/(4)) = 0.75w

MRPL = 50

Setting these two equal to each other, we get:

0.75w = 50
w = 66.67 ≈ 67

Substituting this value of w into the labor supply equation, we get:

l = 4w = 4(67) = 268

Therefore, the optimal choice is w = 67 and l = 268, which is closest to option B.

A Monopsonist That Faces a Labor Supply Curve of the Form